WASHINGTON
—
New
restrictions
on
defense
contractor
share
buybacks
and
dividends
may
need
to
be
written
by
Congress
into
law
in
order
to
withstand
legal
challenges,
the
top
Democrat
on
the
Senate
Armed
Services
Committee
said
today.
“Frankly,
if
Congress
doesn’t
codify
it,
they’ll
go
into
court.
My
sense
[is]
it’s
really
difficult
to
justify
tax
changes
because
the
president
wanted
to
change
them,”
Sen.
Jack
Reed,
D-R.I.,
told
reporters.
“I
think
they
[lawmakers]
would
have
to
because
they
[defense
firms]
have
no
shortage
of
lawyers,
and
they’ll
go
into
court
and
say,
‘This
is
not
within
the
tax
code.
You
can’t
do
it,’”
he
said.
On
Wednesday,
President
Donald
Trump
released
a
long-awaited
executive
order
limiting
defense
companies’
ability
to
pay
dividends
to
shareholders
or
buy
back
stock,
telling
CEOs
in
a
Truth
Social
post,
“This
situation
will
no
longer
be
allowed
or
tolerated!”
Specifically,
the
EO
directs
the
Defense
Department
to
review
contractor
performance,
and
that
poor
performers
that
are
unsuccessful
at
resolving
their
issues
with
the
Pentagon
will
be
penalized.
Future
contracts
will
also
be
written
in
a
way
that
limits
stock
buybacks,
dividends
and
executive
compensation
if
contractors
fail
to
meet
performance
metrics,
the
EO
states.
While
Reed
didn’t
go
so
far
as
to
say
he
supported
the
restrictions
written
into
the
executive
order,
he
said
it
“represents
a
realization
that
these
companies
have
done
extraordinarily
well,
and
yet
we’re
behind
in
so
many
different
systems.
“And
at
the
same
time
they’re
not
making
their
targets
on
budget
and
on
time,
they’re
giving
themselves
significant
benefits
through
stock
buybacks,”
he
said.
A
key
Republican
on
the
committee
—
South
Dakota
Sen.
Mike
Rounds,
who
leads
SASC’s
cybersecurity
subcommittee
—
praised
the
EO
for
putting
pressure
on
contractors
to
make
larger
capital
investments.
“I
think
these
defense
contractors
understand
that
it’s
not
very
popular
with
the
American
public,”
he
said
of
stock
buybacks
and
dividends.
“We
want
to
see
this
money
go
into
real
infrastructure
and
being
able
to
respond
to
the
country’s
needs.
We’re
not
producing
our
weapons
quickly
enough
or
more
efficiently
enough.
And
so
if
we
put
the
resources,
and
if
we’re
going
to
contract
with
them,
we
want
them
to
do
a
good
job
of
actually
getting
the
facilities
in
place
long-term
that
will
help
our
country.”
In
the
nearly
24
hours
since
the
EO’s
release,
few
defense
companies
have
commented
on
the
new
restrictions,
and
none
have
publicly
voiced
concerns
about
the
new
policy
or
signaled
that
they
will
take
legal
action.
During
a
roundtable
with
reporters
today,
HII
CEO
Chris
Kastner
said
the
shipbuilder
is
still
waiting
for
further
details
on
how
the
order
will
be
implemented,
but
he
doesn’t
expect
it
to
change
the
company’s
capital
allocation
plans,
as
it
had
already
stopped
stock
buybacks.
“We’ve
been
investing
more.
I
expect
us
to
grow
more,
and
I
expect
to
be
held
accountable
to
meet
the
commitments
I
make
in
my
contracts.
So
I
don’t
see
that
as
different,”
he
said.
“When
I
read
the
executive
order,
it
felt
like,
okay,
we’re
doing
the
right
stuff.
We’re
going
down
the
right
path.”
In
an
appearance
on
Bloomberg
TV
on
Wednesday,
Anduril
founder
Palmer
Luckey
defended
the
administration,
saying
that
Trump
isn’t
“anti-defense
company”
and
that
companies
funded
by
the
government
should
be
held
to
account.
“When
you
are
working
on
the
taxpayer
dime,
there
is
no
level
of
oversight
or
intervention
that
I
am
against
conceptually,”
he
said. “Now
I
think
some
of
these
might
be
bad
moves.
They
might
not
necessarily
help
the
defense
base,
but
in
concept,
I
think
everything
should
be
on
the
table.”
Defense
firm
Kratos,
which
today
announced
a
contract
win
for
a
Marine
Corps
collaborative
combat
aircraft
program,
expressed
“strong
support”
for
the
EO
in
a
statement
earlier
today,
noting
that
it
“does
not
have
a
practice
of
conducting
stock
buybacks
or
paying
dividends,
choosing
instead
to
reinvest
capital
directly
into
the
development,
production,
and
fielding
of
affordable,
mission-ready
technologies
for
the
warfighter.”
In
a
statement
that
did
not
reference
the
EO
directly,
Lockheed
Martin
said
it
“shares
President
Trump’s
and
the
Department
of
War’s
focus
on
speed,
accountability,
and
results,
and
will
continue
to
invest
and
innovate
at
scale
to
ensure
our
warfighters
maintain
a
decisive
advantage
and
are
never
sent
into
a
fair
fight.”
But
belying
the
public
praise,
some
industry
officials
have
expressed
concern
behind
the
scenes,
especially
when
it
comes
to
potential
jitters
on
Wall
Street.
“This
administration
is
really
focused
on
getting
on
these
companies
putting
more
money
up
front
with
no
contracts
on
the
horizon.
And
money
is
in
search
of
money.
If
these
investors
sense
that
they’re
not
going
to
get
the
return
they
need
from
this
investment,
they’ll
take
it
someplace
else,”
one
industry
official
said
on
the
condition
of
anonymity.
“You’re
messing
with
the
ability
of
companies
to
reward
the
investment
of
their
investors,
and
so,
are
you
chasing
that
investment
away?”